China International Capital (CICC) has released a research report, adjusting its forecasts for China Tobacco International (HK) Company Limited (CTIHK) (06055). Due to impacts on the shipment schedules for leaf tobacco imports and cigarette exports, CICC has lowered its net profit attributable to shareholders forecasts for CTIHK for 2026/27 by 15% and 14% to HK$8.9 billion and HK$11.5 billion, respectively. The current share price implies a 2026/27 P/E ratio of 16x and 13x. The brokerage maintains its Outperform rating on the stock. Considering the earnings forecast adjustments and shifts in market risk appetite, CICC has reduced its target price by 30% to HK$30, which corresponds to 2026/27 P/E ratios of 23x and 18x, implying a potential upside of 44%.
CICC's Core Analysis
For the first half of 2026, CTIHK is expected to report a year-on-year decline of 10-15% in net profit attributable to shareholders. The company issued a profit alert for 1H26, projecting revenue to fall by 25-30% year-on-year to between HK$7.22 billion and HK$7.74 billion. Net profit attributable to shareholders is anticipated to decrease by 10-15% year-on-year to a range of HK$600 million to HK$640 million. This performance is in line with CICC's expectations. The year-on-year pressure on results is primarily attributed to temporary shipment schedule disruptions affecting leaf tobacco import and cigarette export operations.
Leaf Tobacco Import Dynamics
The pace of leaf tobacco imports has been influenced by macro factors, but steady long-term growth is anticipated. According to the company's announcement, factors including international trade relations and shipment schedules are expected to lead to a year-on-year decrease in the volume of leaf tobacco imported from regions like the United States in 1H26, putting pressure on both revenue and gross profit. CICC notes that overseas leaf tobacco is a key component in domestic cigarette blends, and domestic cigarette consumption forms the fundamental support for CTIHK's leaf tobacco import business. From 2019 to 2025, the compound annual growth rate for leaf tobacco import revenue was 12.8%. While macro-environmental conditions and tobacco planting cycles may affect short-term timing, the brokerage believes leaf tobacco imports are positioned for stable, incremental growth over the medium to long term.
Cigarette Export Recovery Outlook
Adjustments to domestic duty-free procedures have impacted cigarette exports, but a recovery is expected in the second half of 2026. The company's announcement indicates that adjustments to business processes in the domestic duty-free market have led to delays in shipment schedules for duty-free cigarettes in 1H26, causing temporary pressure on cigarette export revenue. CICC expects that with the implementation of new business processes starting in July 2026, the company's cigarette export volumes are likely to gradually recover and grow in 2H26. Furthermore, the optimization of the business model is expected to contribute to an improvement in gross margin. Looking ahead, the company's focus on expanding cigar and taxed channels is seen as a driver for sustained growth in cigarette exports.
Long-Term Strategic Value
CICC expresses confidence in CTIHK's unique value as the exclusive capital market operation and international business expansion platform for China Tobacco, as well as its medium-to-long-term momentum from coordinated "organic and inorganic" growth. The brokerage highlights two key areas. Firstly, organically, the leaf tobacco import business provides a solid foundation, while growth in cigarette exports, leaf tobacco exports, the expansion of business scope and structural improvements in Brazilian operations, along with accelerated expansion in overseas markets for novel tobacco products, are expected to drive simultaneous increases in revenue and profit. Secondly, regarding inorganic growth, the company continues to focus on building its capital operation platform, actively seeking high-quality targets aligned with its strategic goals to enhance global competitiveness through external expansion.
Key Risk Factors
Potential risks highlighted include trade friction, foreign exchange rate fluctuations, and downside risks associated with tobacco consumption.
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